DAX30 & DOW JONES: weekly analysis 24 – 29 JAN

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DAX30 & DOW JONES: weekly analysis 24 - 29 JAN

Market movers

Last week ended on a very negative note for equity markets amidst general de-risking. Heavy selling on “risky” assets (especially equities and cryptocurrencies), buying only on bonds, gold, Japanese yen and Swiss franc.

Next week will be very rich in macroeconomic and corporate events. Interesting insights will come mainly from the US with the FOMC meeting, the Federal Reserve’s operating committee. There are expectations  for an interest rate hike at the March meeting, but the next meeting will be important to receive details from Chairman Powell on the timing of rate hikes and the possible start of the quantitative tightening process. In terms of macroeconomic data, keep an eye on the flash PMI indices for the manufacturing and services sectors in Europe and inflation (core PCE index) in the US.

From a corporate perspective, we should pay particular attention to the publication of quarterly reports in the US. Next week we will have many big names including Microsoft, Tesla, Intel and Apple.

Analysis of the week and scenarios for the DAX and Dow Jones

As we pointed out last week, the ongoing declines were not yet over and Friday’s close saw the values indicated.

The S&P500 lost the key support 4,559-4,534 in the middle of the week, giving way to more bearish pressures. On Friday, the prices reached the area 4,429-4,474, closing below it.

Intermediate support in 4,355-4,331 area. It will be important to see how the price behaves if it returns to the 4,429-4,474 area. We signal that the loss of 4,300 would represent a clear signal of monthly reversal.

Intermediate resistances in the area 4,477 and 4,550. Weekly resistance zone in the area 4,596-4,613, from where prices can start to rise again and attack 4,717 and 4,780.

How to move? The markets should not go beyond a correction of 10% from the highs, but the monthly closing will give us the fundamental indication. For this week we expect a bullish sideways phase between Monday and Tuesday and then new declines until Friday. Day of probable weekly high: Monday. Minimum: Friday. In any case we will see what effect the FED meeting on Wednesday will have on stock markets.

DE40 – The German index followed the global sell-off in equity markets, albeit in a more contained way. The prices tried to break through the 15,900 area, but without success; on Thursday and Friday the bearish direction took over, leading the index to close the week just below the very important support in the 15,464-15,518 area.

This week, the Dax needs to reposition itself above 15,665 points, otherwise the bearish pressure will continue. Intermediate resistance at 15,810 and new bullish strength above 15,944. Finally, a break-down of the resistance 16,079-16,136, will offer a chance to see the key resistance 16,230, from which we will aim at the 16,300-16,500 area.

If the prices remain below 15,464-15,518, the 15,227-15,176 area will be the next target and it is the one that maintains the current bullish strength of the DAX.

Monthly support 15,119-15,043. The 15,000 points area remains of vital importance. We always watch the volumetric supports 15,017-14,981 and 14,842-14,804. The loss of these last two areas opens to new lows, with the first target in the 14,600-14,441 area. Vice versa a rebound on these supports can start a process of reversal to the upside, as already happened several times in recent months. Extensions in the 14,231-13,974 area.

If by next Friday the prices will remain above 15,665, we will see a possibility of a continuation of the bullish trend; below 15,464, however, the weekly trend will continue to decline.

US30 – This week the bearish pressure pushed the Dow Jones downwards, without any pullback on a daily basis.  After losing the 35,967 area, the index lost more than 1500 points and came dangerously close to the annual support in the 34,015 area on Friday.

A positioning of the prices above the new resistance at 34,646 area, will offer a bullish relaxation; however, only above 35,127 area the prices will be able to push upwards with more strength. A weekly close above 35,472 will offer a new upward push. The resistances should also be seen as opportunities to go short.

A move that crosses 36,529 and holds that level, will offer a chance to see the 37,000 area if the prices break the last resistance at 36,786. Above 36,236 we keep the possibility of further bullish volumetric pushes.

The range 35,963-35,599 will still offer considerable resistance but also continuous ups and downs.

The 34,015 remains a key area at the yearly level. Confirmed support 33,980-33,725 up to key support 33,608.

Followed by support at 33,215 and confirmed 32,956. The latter is to be monitored as a loss there could lead to fast and new bearish pressures.

Buying supports at 32,761-32,638 and 32,308. The strong buying zone created months ago at 32,308-32,137 is confirmed. Only below it we can witness stronger bearish pressures, with possible structural trend changes.

 

IMPORTANT NOTE: The market is under strong volatility pressure. For intraday trading it is optimal, but for multiday trading we are not in an easy situation yet. The Fed may bring some easing, but the trend does not yet show signs of recovery. It is advisable to wait for the monthly close to see what chances there are for a new uptrend. It is good, therefore, to follow the trend but also to keep under control the supports and the weekly closing, because a reversal can push with force at any time.

Also this week and’ wise to note the openings of Monday’ and the closings of Friday, in order to have confirmation or denial of the trend in course. Avoid overtrading and watch out for volatility imparted by HFTs.  Mark any gaps that may appear during the week, with particular attention to those of Monday.

 

Good trading!

 

Research provided by Giancarlo Prisco

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